Beijing has taken steps to resolve the 'leftover historical problem' of running Xinhua after the state news agency became the subject of a World Trade Organisation dispute, according to the head of the country's media and publishing watchdog.

Liu Binjie, director of the General Administration of Press and Publications, said yesterday that the way forward for Xinhua was being reviewed. That came after the European Union and the United States complained to the WTO this week over a Chinese requirement that foreign suppliers of financial data - such as Bloomberg, Reuters and Dow Jones - must operate on the mainland through Xinhua, their rival.

The EU and US argued that the requirement was unfair treatment, given Xinhua's role in overseeing foreign media and providing financial information.

'The central government is aware of the complaint,' Mr Liu said on the sideline of the annual meeting of the Chinese People's Political Consultative Conference. 'This is a leftover historical problem from the management system, and we are taking active measures to resolve it.'

He was confident the issue would be settled, he said. Asked if the foreign media would be given freedom to report the Olympics, he said: 'Yes. We will take an open and democratic policy for reporting by both foreign and Chinese media. Critical news will be allowed.'

With the continuing National People's Congress meeting expected to give the go-ahead to a sweeping reform of the ministerial system, Mr Liu said the reform would focus primarily on macroeconomic controls.

He hinted that a rumoured merger between the General Administration of Press and Publications and the Ministry of Culture was unlikely.

'The reform focus rests on macroeconomic and social development at this stage,' he said. 'The government will proceed with the reform step by step.' Reform of the food and drug regulator and the Ministry of Labour and Social Security is also expected.